What does Budget 2012 mean to the motorist?

What does Budget 2012 mean to the motorist?

Published on December 8, 2011

One quick thinking commentator described Enda Kenny's State of the Nation address - which seemed to prepare us for the most hard hitting and austere budget in living memory - as the pep talk you receive from the dentist before he starts a root canal. But on the face of it Budget 2012 was not as bad as we had been lead to believe. Certainly is happy that the tub of Vaseline we had to hand as Michael Noonan delivered his first as Minister for Finance has now been returned to the medicine cabinet...

Changes to the Universal Social Charge (USC) and employer PRSI are of course important, but as the name suggests this is a motoring website and the budget changes that affect motorists are what we are concerned with.


As was widely mooted, the top rate of VAT will rise from 21 to 23 per cent from January 1. The motor industry had petitioned to have this increae in tax held off until after the first quarter of 2012, as over fifty per cent of new car sales are made between January and March. Using the Ford Focus as an example, the VAT increase will add an additional €416 to the entry-level 1.6-litre hatchback, meaning the car will start at €21,241 instead of €20,825. It may not sound like a large increase relatively speaking, but it is likely to influence consumer choice.

Carbon Tax

Carbon tax is applied to all forms of fuel, whether it be petrol for your car or home heating oil, but the government held off on imposing an increase on the likes of kerosene and natural gas until after the winter period. Petrol and diesel were not so lucky as they increased by 1.4 and 1.6 cent a litre respectively. As with past budgets some unscrupulous garages may also use the opportunity to increase the fuel price even further.

Motor Tax

Michael Noonan effectively admitted that the carbon emissions based tax system, introduced by the Fianna Fail / Green Party coalition in 2008, was flawed and has invited submissions from the motor industry for a proposed revision in the VRT and Motor Tax systems that reflect the technological advancements made in the industry. In other words the Exchequer is not making enough money off the low CO2 cars buyers are currently snapping up and is looking to change the system.

In the meantime the current Motor Tax rates have risen with cars taxed on the pre-2008, engine size-based system seeing an increase of 7.5 per cent across the board. Changes to the CO2-based tax rates are listed in the table below but suffice to say they all increase.